Prepare journal entries to record the interest payable on December 31, 2020. On May 1, 2020, Christina

Prepare journal entries to record the interest payable on December 31, 2020.

Transcribed Image Text:

On May 1, 2020, Christina Fashions borrowed $107,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $26,750 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2020, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets $117,000 Current liabilities $45,000 Non-current assets 179,000 Loan payable 107,000 Common shares 69,000 Retained earnings 75,000 Total liabilities and Total assets $296,000 shareholders' equity $296,000 Does Christina Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 1 decimal place, e.g. 1.2.) Current ratio Christina Fashions the bank's minimum current ratio. On May 1, 2020, Christina Fashions borrowed $107,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $26,750 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2020, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets $117,000 Current liabilities $45,000 Non-current assets 179,000 Loan payable 107,000 Common shares 69,000 Retained earnings 75,000 Total liabilities and Total assets $296,000 shareholders' equity $296,000 Does Christina Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 1 decimal place, e.g. 1.2.) Current ratio Christina Fashions the bank's minimum current ratio.

Answer rating: 100% (QA)

Step one Current ratio Current assetsCurrent liabilities 117000 45000 26 The current ratio is more t... View the full answer